COMMISSIONER OF INCOME TAX Vs. GWALIOR METAL INDUSTRIES

JUDGEMENT

(1.) THIS is a reference under Section 256(2) of the I.T, Act, 1961 (hereinafter to be referred to as "the Act"). In the statement of the case submitted by the Income-tax Appellate Tribunal, Patna (hereinafter to be referred to as "the Tribunal"), the following question has been referred for the opinion of this court :

(2.) FROM the statement of the case it appears that in the course of the assessment proceeding for the assessment year 1963-64, the ITO found that a sum of Rs. 20,000 in all had been credited in the name of the partners of the assessee-firm. On the failure of the assessee to produce any evidence in support of the genuineness of these cash credits, the ITO added the sum of Rs. 20,000 to its income as income from undisclosed sources. The assessee did not challenge this addition in appeal before the AAC. Thereafter, a notice was issued to the assessee as to why penalty under Section 271(1)(c) of the Act be not imposed against the assessee. A written explanation was submitted on behalf of the assessee. Ultimately, the IAC by his order dated March 2, 1970, held that the assessee was guilty of concealment and also of furnishing inaccurate particulars of income justifying penal action under Section 271(1)(c). He imposed a penalty of Rs. 36,450. On appeal filed on behalf of the assessee before the Tribunal, the aforesaid order of the IAC was set aside. When the prayer of the Department to refer the matter to this court was rejected by the Tribunal, an application for the same was filed before this court. This court on September 10, 1976, directed the Tribunal to state the case and to submit the question of law aforesaid for the decision of this court. Pursuant to the said order, the Tribunal has submitted the statement of the case and the question of law which has to be decided.

(3.) THIS fact was taken note of by the Tribunal while allowing the appeal of the assessee. The Tribunal has observed as follows :